Warmer weather has arrived. And businesses, like people, greet the change of seasons with a sense of energy and optimism — it’s a popular time for romance. While it’s common for couples to get hitched in greater numbers at this time of year, businesses too are increasingly stepping up to the alter saying “I do” in the form of a merger or acquisition.
Unfortunately, like so many couples, what starts out as unbridled passion and enthusiasm quickly wanes as the reality of a merger hits home.
Statistically, companies fair worse than people do. A staggering 75 per cent of corporate marriages end in failure or never achieve the objectives they set out to reach. This has an enormous cost — to the bottom line, to culture and to the employees. It also has a significant impact on human resources professionals and their role.
Despite these statistics, and the costs, romance continues unabated. In Canada alone last year, there were almost 600 merger and acquisition (M&A) deals with international firms valued at more than $234 billion. This is big business and it is growing, up 33 per cent in dollar volume to the previous year.
In survey after survey, CEOs state the number one reason for moving forward is growth. Yet the number one cause of failure is culture clash. Numbers drive the deal, but employees make or break it. Survey data also indicates that the overwhelming majority of CEOs feel that communication is the most important ingredient helping to facilitate the combining of cultures. And yet more than half said their efforts in this area are unsuccessful.
However we’re beginning to see a change, companies are either learning from past mistakes or taking heed of the statistics. They no longer rush to the deal; instead they are developing a new and better M&A model. This new model addresses the two key weaknesses — culture and communication. It also recognizes that additional expertise is needed on the merger team from HR.
Culture: Can we really live together?
The biggest change to the M&A model has been the addition of a cultural audit in the due diligence phase. Many growth-oriented companies look at an M&A based on numbers — growth in assets, percentage increase in market share, reduction in operating costs and other factors. Theoretically these factors should translate to the bottom line through increased profits, improved shareholder value and a better return on capital.
Peering behind the financials, what’s becoming clear is that growth is dependent on things that include acquiring top talent, broadening customer relationships, expanding brand equity and harnessing innovation and creativity. These are the people or human resource components of a company.
Cultural audits are being led by HR and typically include a look at:
•leadership style (inclusive vs. paternalistic);
•structure (hierarchical vs. flat);
•decision-making (fast vs. bureaucratic);
•communication (open vs. secretive);
•reward and recognition policies;
•performance management systems; and
•employee satisfaction surveys.
In most cases metrics around these areas are based on a rating scale.
Time for a reality check — in all but a few cases, if the numbers of the cultural audit show a bad fit, the deal still goes ahead. But now HR is paying close attention to these disconnects. They are now putting plans and processes in place to deal with these gaps and to close them before things deteriorate. And, they have the support of the leadership team.
Communication: Making the marriage last
The other improvement has been in the attitudes by leaders towards employees in the M&A process. Once the decision has been made to merge, most organizations scramble to promote the wisdom of the deal or to appease skeptical investors and customers. Historically employees have been left out of the communication loop.
Companies have failed to realize that during times of change employees will have issues that affect their ability to focus on business. When will the deal happen? Will I have a job? Will the company move? Without a proper communication strategy — that focuses on what employees need and want throughout the merger — success is a gamble at best.
In the new model, companies are trying to mitigate the risk of failure by acknowledging that employees will not naturally come along for the ride. They know all too well that if employees are not on board and motivated, the deal is dead before the ink is dry. There’s a new appreciation for an ongoing internal communication strategy. This is an area where HR can, and must, play a strong role.
Typically this strategy involves:
•creating a dedicated internal communication team for the duration of the merger;
•developing key messages specifically for employees;
•establishing communication protocols — what you will and won’t say;
•producing exclusive M&A communication materials such as newsletters, intranet site, town halls;
•measuring employee knowledge and feelings throughout the process; and
•ensuring leaders are visible to employees.
Mergers and acquisitions will continue to drive business in the 21st century. In the face of this many organizations realize the traditional model is flawed and a new approach is required, one that looks beyond the numbers. What’s emerging is a greater appreciation for employees’ role in affecting market share, customer loyalty, quality, growth, shareholder value and net income. HR must be at the head table playing an active role.
After all falling in love is easy, making it last is the hard part.
Sandy French is president of Toronto-based Northern Lights, an internal communication agency. He can be reached at (416) 593-6104, ext. 222 or visit www.northernlights.ca.
Merger mania
Who’s merging? It may be simpler to list who isn’t. Recent high-profile Canadian nuptials include:
•Vivendi/Seagrams;
•British American Tabacco/
Imasco;
•Air Canada/Canadian;
•Canada 3000/Royal Airlines;
•AIM/Trimark;
•Indigo/Chapters;
•Toronto Dominion Bank/Canada Trust; and
•BCE/CTV/Globe &Mail.
Unfortunately, like so many couples, what starts out as unbridled passion and enthusiasm quickly wanes as the reality of a merger hits home.
Statistically, companies fair worse than people do. A staggering 75 per cent of corporate marriages end in failure or never achieve the objectives they set out to reach. This has an enormous cost — to the bottom line, to culture and to the employees. It also has a significant impact on human resources professionals and their role.
Despite these statistics, and the costs, romance continues unabated. In Canada alone last year, there were almost 600 merger and acquisition (M&A) deals with international firms valued at more than $234 billion. This is big business and it is growing, up 33 per cent in dollar volume to the previous year.
In survey after survey, CEOs state the number one reason for moving forward is growth. Yet the number one cause of failure is culture clash. Numbers drive the deal, but employees make or break it. Survey data also indicates that the overwhelming majority of CEOs feel that communication is the most important ingredient helping to facilitate the combining of cultures. And yet more than half said their efforts in this area are unsuccessful.
However we’re beginning to see a change, companies are either learning from past mistakes or taking heed of the statistics. They no longer rush to the deal; instead they are developing a new and better M&A model. This new model addresses the two key weaknesses — culture and communication. It also recognizes that additional expertise is needed on the merger team from HR.
Culture: Can we really live together?
The biggest change to the M&A model has been the addition of a cultural audit in the due diligence phase. Many growth-oriented companies look at an M&A based on numbers — growth in assets, percentage increase in market share, reduction in operating costs and other factors. Theoretically these factors should translate to the bottom line through increased profits, improved shareholder value and a better return on capital.
Peering behind the financials, what’s becoming clear is that growth is dependent on things that include acquiring top talent, broadening customer relationships, expanding brand equity and harnessing innovation and creativity. These are the people or human resource components of a company.
Cultural audits are being led by HR and typically include a look at:
•leadership style (inclusive vs. paternalistic);
•structure (hierarchical vs. flat);
•decision-making (fast vs. bureaucratic);
•communication (open vs. secretive);
•reward and recognition policies;
•performance management systems; and
•employee satisfaction surveys.
In most cases metrics around these areas are based on a rating scale.
Time for a reality check — in all but a few cases, if the numbers of the cultural audit show a bad fit, the deal still goes ahead. But now HR is paying close attention to these disconnects. They are now putting plans and processes in place to deal with these gaps and to close them before things deteriorate. And, they have the support of the leadership team.
Communication: Making the marriage last
The other improvement has been in the attitudes by leaders towards employees in the M&A process. Once the decision has been made to merge, most organizations scramble to promote the wisdom of the deal or to appease skeptical investors and customers. Historically employees have been left out of the communication loop.
Companies have failed to realize that during times of change employees will have issues that affect their ability to focus on business. When will the deal happen? Will I have a job? Will the company move? Without a proper communication strategy — that focuses on what employees need and want throughout the merger — success is a gamble at best.
In the new model, companies are trying to mitigate the risk of failure by acknowledging that employees will not naturally come along for the ride. They know all too well that if employees are not on board and motivated, the deal is dead before the ink is dry. There’s a new appreciation for an ongoing internal communication strategy. This is an area where HR can, and must, play a strong role.
Typically this strategy involves:
•creating a dedicated internal communication team for the duration of the merger;
•developing key messages specifically for employees;
•establishing communication protocols — what you will and won’t say;
•producing exclusive M&A communication materials such as newsletters, intranet site, town halls;
•measuring employee knowledge and feelings throughout the process; and
•ensuring leaders are visible to employees.
Mergers and acquisitions will continue to drive business in the 21st century. In the face of this many organizations realize the traditional model is flawed and a new approach is required, one that looks beyond the numbers. What’s emerging is a greater appreciation for employees’ role in affecting market share, customer loyalty, quality, growth, shareholder value and net income. HR must be at the head table playing an active role.
After all falling in love is easy, making it last is the hard part.
Sandy French is president of Toronto-based Northern Lights, an internal communication agency. He can be reached at (416) 593-6104, ext. 222 or visit www.northernlights.ca.
Merger mania
Who’s merging? It may be simpler to list who isn’t. Recent high-profile Canadian nuptials include:
•Vivendi/Seagrams;
•British American Tabacco/
Imasco;
•Air Canada/Canadian;
•Canada 3000/Royal Airlines;
•AIM/Trimark;
•Indigo/Chapters;
•Toronto Dominion Bank/Canada Trust; and
•BCE/CTV/Globe &Mail.
